Anshuman Daaga

SINGAPORE, Reuters – Singapore Exchange (OTC) has emerged from the shadows regional rivals after years of struggle. It is now looking to become the center for blank cheque firms. This will be possible thanks to regulatory reform, state support, and a growing tech sector.

    Encouraged by the flurry of Southeast Asian tech start-ups seeking funding and the bourse’s revised rules, Singapore could list up to a dozen special-purpose acquisition companies (SPACs) within the next 12-18 months, bankers, venture capitalists, and analysts say.

    A key test for SGX will come when such companies, also known as blank-cheque or shell firms, have to seal merger targets within two years, a “de-SPACing” process already weighing on U.S. deals as hundreds of SPACS chase targets.

Analysts believe Singapore will face a difficult task to attract its risk-averse investors to a new asset type, particularly after SGX’s previous efforts to stabilize its equity market had failed.

Large, international institutions in Hong Kong have opted for Hong Kong’s blockbuster equity offerings over the last decade.

SGX welcomed three SPACs to its inaugural major appearance in Asia last month. The SPAC craze has been a failure in the United States. They are often simpler than an IPO and more lucrative for startups.

Eng-Kwok Seat Moey from DBS is the capital markets head and joint issue manager of two SPACIPOs. Credit Suisse (SIX:).

Bankers believe that Singapore SPACs will pursue targets in the fintech, tech, and consumer sector. The target’s value could vary from S$800 million (596 million USD) to S$2 trillion, with possible dealmaking as early as this calendar year.

Ashish Wadhwani (a Singapore-based managing partnership at IvyCap Ventures), an Indian firm with approximately $400 million worth of assets, stated that the size of the potential, in terms of smaller companies scaling up, and applying for listing, is many times greater than it was many decades ago.

According to Refinitiv data, the fundraising for SGX fell by half last year. This is a 6-year record, and there were only eight listings.

Singapore’s prudent approach was underpinned by Temasek-linked entities, a state investor. They were cornerstone investors for two of three SPACs. All of them were highly subscribed.

Venture Holdings (NASDAQ: Vertex) was a Temasek affiliate and the first company to start a S$200m tech SPAC.

CAUTIOUS START

“I think the exchange and regulators will exercise great care in these procedures. Chua Keelock, Vertex CEO and owner of $5.1 Billion in assets, stated that “I don’t believe they will suddenly open the floodgates for everyone to come.”

The S$150 million SPAC was backed by Novo Tellus (regional tech, industrial buyout fund). It also included a Temasek Unit.

Tikehau Capital in Europe, a European asset management firm, chose Singapore to be its SPAC listing. The cosponsors included Bernard Arnault (LVMH Chairman).

These latest developments could result in more global funds participating in the public equity markets of Singapore. Singapore is already an important Asian financial and wealth hub.

“It is a chicken-and egg situation. Wadhwani stated that it is possible to create a SPAC marketplace, which will attract more investors.

SPACs offer stock with warrants which can be viewed as an attractive way to attract investors early.

Prantik Mazumdar, a wealthy investor, believes that listing large regional names in Singapore, and the successful business mergers at SPACS, are more important than directly investing in preIPO U.S. tech firms.

Mazumdar stated that he is not likely to pursue opportunities in certain sectors or differentiated structures offered by SPACs unless he has other options.

SGX had a discussion about SPACs back in 2010 but it didn’t receive favourable feedback from the market. In 2011, it created a SPAC framework with an emphasis on the scrutiny of sponsor track records. This required that they invest in their SPACs. Unlike Hong Kong’s, SGX allows retail investors to join.

Chandra Tjan co-founded Alpha JWC Ventures, which is based in Indonesia. “A SPAC listing will definitely help a startup exit and raise money faster with less hassle,” she said.

Singapore has also launched two capital funds of S$2 billion last year for late-stage funding, IPOs and dealmaking surges.

Research firm Tracxn has shown that 20 private companies from Southeast Asia have joined the $1B or higher list in 2021. In addition, 53 businesses joined the list with the immediate potential to reach $1Billion, according data.

Neil Parekh is the CEO of Pegasus Asian, a Tikehau-backed Singapore SPAC. He stated, “Fundamentally it’s more difficult to sponsor Singapore,” referring to the requirements for capital and willingness to accept independent directors to decide de-SPAC.

Singapore’s international success as a hub for real-estate investment trusts (REITs), could provide a model to create a SPAC marketplace.

Mohamed Nasser Ismail from SGX, SGX’s head for equity capital markets, stated that Singapore has all the ingredients necessary to create a healthy SPACs marketplace. He also said, “If we maintain a strict watch on the quality of sponsors, it will be able to develop the same way the REIT market.”

($1 = 1.3426 Singapore dollars)